Exam 1 Flashcards
Chapters 1, 2, 3
In economics, the pleasure, happiness, or satisfaction received from a product is called
utility
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, at least I didn’t lose any money on my financial investment. His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist’s analysis in this case incorporates the idea of
opportunity costs
Macroeconomics is mostly focused on
the economy as a whole
In economics, choices must be made because we live in a world of
scarcity
The slope of Supply and Demand are inversely related in regards to _____ and _______.
price; quantity
Which of the following most closely relates to the idea of opportunity costs?
trade-offs
Which of the following is a microeconomic statement?
the price of smartphones declines 2.8 percent last year
One reason some manufacturing companies have moved production from overseas locations back to the United States is rising foreign labor costs. Assuming that managers at these companies used all available information, including the rising cost of foreign labor, when making the decision to move production back to the United States exemplifies which key economic idea?
people are rational
One reason some manufacturing companies have moved production from overseas locations back to the United States is an increasing preference by U.S. consumers for products made in the United States. If buyers have increased their preference for domestically produced goods and manufacturers believe they can increase revenues by supplying more of these goods, firms are following which key economic idea when they return production to the United States?
people respond to economic incentives
Pookie’s Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine “as is” now for $1,000. What should he do?
He should sell the machine now to make the most profit.
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
The term “market” in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?
marginal revenue
Billie’s Billiard Barn has seen its business slow down ever since Patti’s Ping Pong Parlour opened up across the street. Since the opening of Patti’s Ping Pong Parlour, the opportunity cost of shooting pool at Billie’s Billiard Barn has ________ for Billie’s customers who also like to play ping pong
increased
Consider the following economic agents:
a. the government
b. consumers
c. producers
Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?
the government
Who receives the most of what is produced in a market economy?
those who are most willing and able to buy them
All centrally planned economies
have been political dictatorships
The town of Harmonia gives away all 500 tickets to its annual Founder’s Day Free Concert-in-the-Park to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a “free ticket” economically efficient?
Yes, it was a voluntary exchange that benefited both parties.
It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.
reduce; not as highly valued as others
________ occurs when economic benefits are distributed fairly.
equity
How are the fundamental economic decisions determined in Canada?
Individuals, firms, and the government interact in a market to make these economic decisions.
Economic models do all of the following except
portray reality in all its minute details.
Which of the following statements about positive economic analysis is false?
There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
Which of the following is a normative economic statement?
The price of gasoline is too high.
Which of the following is a microeconomic question?
What factors determine the price of carrots?
Microeconomics is the study of
how households and firms make choices.
Which of the following is a macroeconomic question?
What determines the inflation rate?
Macroeconomics is the study of
the economy as a whole
Economists spend much of their time
describing how choices are made and analyzing the results of those choices
Which of the following statements is true about profit?
Profit is the difference between revenue and cost
In economics, the accumulated skills and training that workers have is known as
human capital
